How Would Getting Another Credit Card Affect My Credit?

by Neil Kokemuller

You may think getting another credit card would give you more financial freedom, and in some ways, it will. However, it will also make an impact on your credit score you may not like. The short-term gratification of having more buying power is a lure used by credit card companies to put one more piece of plastic in your hands. Before you accept that great promotional offer or high credit limit card, figure out how the new card may change your long-term financial picture.

Know Thyself

You know yourself better than anyone else when it comes to how you use your credit. If you know your not very disciplined about how you spend, the new card could mean more trouble to your credit score and overall financial situation. If you are considering another card because the ones you have are at maximum limits, you would likely benefit more by paying those down as quickly as possible. This helps your payment history, which is 35 percent of your FICO score. Plus, you avoid the temptation of a new card with a zero balance.

Take the Plunge

It is somewhat ironic, but people who are the most disciplined with spending are often the ones who should consider getting another credit card. Some financial experts actually encourage parents to get a joint card with their teens to help them build a credit history. Even so, the new card may initially have some negative repercussions. New credit inquiries usually knock your score down a few points. Over time, though, if you build a lengthy credit history, make regular payments on time and keep a low debt-to-limit ratio, you can greatly improve your score.

New Account Factor

The actual impact of your application inquiry and new account vary based on a variety of factors related to your credit history. The new account FICO category impacts 10 percent of your FICO score. Applying for multiple new card accounts at once typically has a more negative effect than making a single card application. Your average length of credit history affects 15 percent of your score. Thus, applying for one or more new accounts when you have a short average credit history accentuates the negative effects on your score. The impact of getting a new card when you have long credit histories with a small number of lenders is likely minimal.

Additional Considerations

You could actually come out with a positive credit impact if you get a new card -- and refuse to use it. The card will carry a zero balance, which can only improve your debt-to-limit ratio. The amount of credit you use makes up 30 percent of your FICO score. However, some card use combined with diligent payments can have a much more significant effect because both contribute to a credible credit history. Ultimately, you have to weigh possible advantages of a new card against your ability to effectively manage it.

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About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.